A credit score is a calculation; the product of an algorithm that is an estimation of how likely a person is to pay their bills. These models were created by independent companies such as FICO (The Fair Isaac Company) and VantageScore. These companies generally keep their statistical analysis secret—so the lender and consumer usually don't know exactly how it is calculated. Unfortunately, this makes working on your goals for credit repair in Dallas, Texas, challenging when you first get started examining the numbers.
These calculations have been around for a long time and have gone through different iterations over time. Just as we update other parts of our lives as the world changes, so do credit scoring models to keep up with new data. Which credit score do you need to keep track of—and what do you need to know about these leading scoring models? Read more to find out the hidden details of credit scores from the Credit Divas!
VantageScore
The VantageScore model was created by Experian, Equifax, and TransUnion when they decided they wanted an alternative to the trendier FICO score.
- The current VantageScore is VantageScore 4.0. The difference in this score is the use of trended data, also known as a consumer's data over time.
- The 4.0 version also employs machine learning technology for those consumers who have not had any changes to their credit data for some time.
- This score is based on updated consumer trend data from 2014-2016, and VantageScore is confident that their prediction models have risen in reliability substantially.
What Does This Mean for You?
Because this score was developed by the "Big 3" credit bureaus, the score is relatively consistent when calculated by any of them. When you pull a credit score from these big-name bureaus, it should be close to the others.
How Is This Score Calculated?
- This score uses a 350-800 point model.
- Payment History: 40%
- Depth of Credit: 21%
- Utilization: 20%
- Balances: 11%
- Recent Credit Applications: 5%
- Available Credit: 3%
The FICO Score
The FICO score is the original credit score, launched in 1958 by The Fair Isaac Company. For the longest time, this score was the only one used by creditors—and it is still the most popular score out there. The current version of the FICO score is the FICO 08, but a new version, FICO 10, is launching soon! As the update drops, we'll cover what you need to know about this change in an upcoming blog—so be sure to subscribe for blog updates from your Divas! This ensures you're always aware of any changes that could affect your efforts at credit repair in Dallas, Texas!
What Does This Mean for You?
FICO has numerous subscores that are industry-based, such as FICO auto, which is calculated for auto loan providers to determine creditworthiness. If you are working with a creditor that uses FICO scoring, be sure to learn which one they are using so you can look into what changes are going to make the biggest difference to the score being used.
How Is This Score Calculated?
- This score uses a 300-850 point model.
- Payment History: 35%
- Your Debts: 30%
- Length of Credit History: 15%
- Types of Credit Held: 10%
- New Inquiries: 10%
As you can see, these scores are calculated very differently, with different weights placed on different behaviors. This is why a holistic approach to credit repair in Dallas, Texas, is the most beneficial for you! You can make some quick changes to your scores by practicing great credit "hygiene," such as paying down debts, keeping aged accounts open longer, asking creditors to give you a bigger credit line, and so many other tactics. However, the root issues are the same.
Just like there are good health behaviors, there are certain good credit behaviors that will never go out of style—and taking the time to learn how to have this model credit behavior is going to bring you long-term value! Whether it's in the opportunities that a great score will offer or the reduction in stress that comes from knowing you have options in an emergency, working on your credit now is an investment in your future. All the Credit Divas here at Credit Diva of Dallas believe that everyone deserves a debt-free future—especially you!
If you would like to start building lifelong positive credit habits, get in touch with your Divas! Our team is here to guide you through the process every step of the way—and we'll also use our expertise and time to help you fix your credit, too!
